What is earning quality?
As a new investor, I used to look at earning of a company heavily. I think earning is also the driver of a stock price in the wall street. If a company issues earning report which beats the street, and offers upbeat outlook for next quarter (or next year), the street will bid up the stock, vice versa. But there is two problems when we solely focus on earnings. For one, growth company, especially IPOs like Google and Salesforce in 2004, and Baidu in 2005 may not be profitable. Or if they are profitable, they don’t make too much monney thus its PE ratio is usually high.
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